David Lange's Labour Government was re-elected in 1987 with an even greater majority than in 1984, despite controversy around its radical economic reforms. Its popular anti-nuclear stance contributed to its win.

But cracks began to show early on in the Labour Government's second term. 'Rogernomics' – the radical free-market policies of right-wing Finance Minister Roger Douglas – alienated party members loyal to Labour's left-wing tradition.

Lange called for 'a cuppa tea' – a break in the reforms. Douglas disagreed. The final split came in late 1988, when Lange fired Douglas. He resigned himself in August the following year, and Geoffrey Palmer took over as Prime Minister.